Tier 2 Capital

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Tier 2 Capital

Capital in a bank that is difficult to calculate or liquidate, especially as compared to Tier 1 capital. Under the Basel I Accord, tier 2 capital includes revaluation reserves (or the increase in the value in an asset after it is reappraised), general provisions (or money that the bank has lost but has been unable to calculate), and subordinated debt (or debt that, in the event of default, receives payment only after some other debt). Tier 2 capital is included in calculations of a bank's reserve requirements but is not considered as reliable as Tier 1 capital.
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References in periodicals archive ?
The subordinated loan agreement between JSC Bank of Georgia and the EFSE has a maturity of 10 years and qualifies for tier two capital under the Basel Three framework introduced recently in Georgia.
It was supported in both 2015 and 2016 through the issue of subordinated bonds, which qualify as tier two capital, as well as retained earnings, although the payout ratio is high.
To boost foreign currency reserves in the nation, the central bank has requested that commercial banks use their surplus funds to be included in their Tier Two Capital. Banks usually make the surplus funds by selling local-currency Treasury bonds from their portfolio and buying eurobonds simultaneously.
Summary: In a move to boost foreign currency reserves, the Central Bank requested that commercial banks use their surplus funds, which they generate by selling local-currency Treasury bonds from their portfolio and buying eurobonds simultaneously, as provisions in Lebanese pounds to be included in their Tier Two Capital.
The contribution is comprised of tier one and tier two capital.
Capital requirement The loan will support the bank's tier two capital requirement and is subject to legal and regulatory approvals, the banks said in a disclosure statement posted on MSM website.
Sri Lankan banks based on the tier one capital can successfully engage the Qatari banks to attract tier two capital," the central bank governor said.
"But most banks now set internal targets slightly north of 15% - thus 15%, 16%, 17% - so whenever their capital gets close to that level it is a trigger to raise tier one or tier two capital.
The measure of solvency for a bank is done by the ratio of tier one and tier two capital.
(i) all tier one and tier two capital instruments issued by The National Bank of New Zealand Limited must be deducted from ANZ Banking Group (New Zealand) Limited's tier one capital unless they are held by a person who is not a member of the ANZ Banking Group (New Zealand) Limited's banking group; and
In contrast, banks' holdings of provisions against loan losses, a traditional method for managing credit risk, can be used to fulfill their tier two capital requirements.